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Sunday, June 6, 2010

Stock Index Chart Patterns - FTSE 100, CAC 40, DAX - Jun 04, '10

FTSE 100 index chart

The bulls kept the FTSE 100 index chart pattern above the 5100 level on a closing basis right through the holiday shortened week. But they failed to take the index past the dual hurdle of the merged 20 day and 200 day EMAs, though they managed to do so on an intra-day basis on Thursday and Friday.

The sudden news of the likely sovereign default announced by the new Hungarian government encouraged the bears, who were looking for some excuse to sell. The FTSE 100 closed 62 points (1.2%) lower on a weekly basis.

The technical analysis indicators are signalling more weakness ahead. The 20 day EMA has slipped below the 200 day EMA. The final technical confirmation of a bear market - if it is still required - will happen when the falling 50 day EMA drops below the 200 day EMA.

The slow stochastic, RSI and MFI have turned down after reaching their 50% levels. The MACD remains in negative territory, but is above the signal line. The bulls haven't been routed yet, but the future looks bleak.

DAX index chart

In last week's analysis of the DAX index chart pattern, I had mentioned that the technical indicators were pointing to short-term bullishness. The bulls made a spirited effort to take the index above the 6000 level and the 50 day EMA.

The Hungarian news put paid to their hopes. A 'reversal day' pattern (higher high and lower low) was formed on Friday with volumes touching the week's high. The index slipped below both the 20 day and 50 day EMAs.

Unlike the FTSE 100, the DAX index is above the rising 200 day EMA. But bullish hopes should be tempered by the fact that the index has continued to make lower tops. That means the down trend continues.

The technical indicators show decreasing strength. The slow stochastic is at the 50% level, but has stopped rising. The RSI and MFI are just below their 50% levels. The MACD has moved above the signal line but remains in negative territory.

CAC 40 index chart

The CAC 40 index chart pattern shows that it is all over bar the shouting for the bulls. Their feeble effort at a rally faced resistance from the falling 20 day EMA. All three EMAs are moving down with the index below them. This is a time for short-selling and not buying.

The RSI made an unsuccessful effort to get up to the 50% level. Likewise for the slow stochastic. The MFI is going sideways below the 50% level. The MACD is above the signal line but in negative territory.

Bottomline? The chart patterns of the European indices show different degrees of bear domination. The DAX is in a clear down trend though technically still in a bull market. The FTSE 100 is a hop-step away from entering a bear market. The CAC 40 is in a confirmed bear market. Sell the rises. Better buying opportunities may come soon - so keep those 'buy lists' ready.